Real Estate Equities is moving forward with development of Technology Park Apartments, a $20 million, 164-unit affordable housing community in Rochester, Minn., with a Freddie Mac Non-LIHTC Forward Commitment loan secured by mortgage banking firm Merchants Capital.
Nate Stencil, CEO of the Stencil Group, a Sioux Falls, S.D.-based development firm active in Rochester, is a partner with Real Estate Equities on the project. Stencil Group is the general contractor and Kaas Wilson Architects of Bloomington, Minn., is the architect. The first building is expected to be completed in September with the second building due for completion in December.
The project was financed through a 10-year loan, the first one of the new program designed to spur development of workforce housing. The Non-LIHTC forward are unfunded, forward commitments for affordable housing developed by non-profits and subsidized, rent-restricted affordable housing for-profit developers can use for new multifamily or substantial rehabilitation projects.
“We appreciate the opportunity to assist in the development of this housing community and the chance to help close Rochester’s affordable housing gap,” Michael Dury, president of Merchants Capital, said in a prepared statement. “We were able to simplify the process with our ability to provide the Freddie Mac Non-LIHTC Forward Commitment product for the long-term permanent financing.”
Forty percent of Technology Park Apartments will be priced affordably for individuals earning an annual income of $40,000, or 60 percent of the area’s annual median income. The Greater Minnesota Housing Fund contributed a total of $3.4 million in capital for the development of these units, which will cost renters an estimated $1,150 a month for a two-bedroom apartment.
An additional 35 percents will go to individuals earning about $55,000 a year, or 20 percent below the AMI. The remaining units will be priced slightly below the current market value, about $200 to $300 less than similar apartments in the area.
“We are very excited to be on the forefront of developing a modern workforce housing project that is not heavily reliant on government funding sources,” Alexander Bisanz, director of acquisitions at St. Paul, Minn.-based Real Estate Equities, said in a prepared statement. “Partnering with the Greater Minnesota Housing Fund to provide low-cost, mission-driven equity—as well as structuring attractive financing with Merchants Capital—truly allowed us to get this project off the ground.”
Leading the trail
Rachel Robinson, fund manager with the Greater Minnesota Housing Fund, said Technology Park Apartments would be a pilot for future projects.
“In all of Greater Minnesota Housing Fund’s work to create and preserve unsubsidized affordable housing, we have struggled to crack the code on the production of new affordable units without reliance on public resources. Now as an equity partner in Technology Park, we are furthering our mission and innovating ways to increase the funding pie with new financing solutions,” she said in prepared remarks.
David Leopold, vice president of targeted affordable sales & investments at Freddie Mac Multifamily, said the new Non-LIHTC Forward Commitment is designed to help developers finance apartments with moderate rents without government subsidies.
“We created Non-LIHTC Forwards for this very purpose—to provide the flexibility and certainty mission-driven investors need to finance housing for low- and very-low income families,” he noted.
Other affordable projects
Technology Park Apartments isn’t Real Estate Equities only affordable housing project in Rochester. In May, the firm obtained a $16.1 million HUD 221(d)(4) loan for the construction of Eastgate Apartments, a 135-unit apartment community, secured by Dougherty Mortgage. Set to open this summer, the units at Eastgate Apartments will be restricted to residents earning 60 percent or less AMI. This project will also receive equity from the sale of Low Income Housing Tax Credits, as well as tax-exempt bonds that were underwritten by Dougherty Mortgage affiliate Dougherty & Co.
Real Estate Equities, which specialized in apartments, affordable housing and senior housing, also has developed multifamily properties in Minnesota, Wisconsin and Indiana.
Image courtesy of Merchants Capital